How do I be good with money?

This week FoxPlan Adviser, Aidan Te Wake Hope gives us his thoughts on how to improve your ability with cash. Connect with Aidan on LinkedIn HERE.

We often hear the phrase “good with money” being thrown around, usually in a negative sense talking about “not being good with money” – Impulse purchases, spending first and saving what’s left (more than often, not a lot). But what does it mean to be good with money?

Well..

It used to be a lot easier to be ‘good with money’ than it is now, credit card debt was low (or non-existent), most people used cash and the cost of living was much lower. Our current reality is much different, it’s not easy to save money and still live what we might call a ‘normal’ life.

Being good with money isn’t something you can turn on or off – like any skill it takes practice. But fear not my friends, not all heroes wear capes - so here are four ways to help you be better with your money.

1. Take advantage of your employers KiwiSaver match

Your employer must match your KiwiSaver contributions to 3% - some will also match your contributions past this point too.

It’s FREE MONEY! Who doesn’t like free money?

If you’re on 52k a year, that’s around $30 a week / $1,560 a year / $62,400 over 40 years (and that’s before any market returns, growth or increases in pay).

2. Have a MOJO fund (some emergency savings)

Sad truth is being poor is expensive. Miss a direct debit or go into overdraft and the banks won’t hesitate to charge a bunch of crazy fees. If you don’t have much money to begin with and your savings are earning little interest, you’re just one car won’t start day away from a world of financial pain.

For people my age (22) it’s about getting your habits right to get three months’ worth of expenses saved in the bank (rent/bills/food/everything). Call it a bucket of mojo (cheers Barefoot) to use in case of emergency – no, a trip to the Gold Coast because Grabaseat has cheap flights isn’t an emergency.

A large bank balance doesn’t bring happiness but saving does because;

Saving = Freedom

When you’ve got cash in the bank or cash under your mattress, you have the power, you call the shots.

3. Know when something is too good to be true

Get rich fast – if we could all do it, we would. Reality is though when something seems too good to be true it usually isn’t.

The best advice I can give is when you’re planning on doing anything with your money to try make more money – if there’s doubt in your mind that it might be too good to be true then you’re probably right. Listen to that little voice inside your head.

This is where advice is super important too. Not advice from your brother, neighbour or dog but rather independent advice – I recommend you speak with a financial adviser like myself. Citizens Advice Bureau are an awesome free resource for Kiwis as well.

4. You can save for purchases instead of using debt (it’s not impossible)

We’ve all got a bit of an instant satisfaction habit – why wait 4 weeks to save for something when we can have it now? Afterpay and interest free buy now/pay later options are everywhere.

Reality is unless you’re very disciplined and use these options very rarely, these options can feed our bad habits and make us ‘comfortable’ with being permanently in debt. Before we know it, we are in the deep end of the pool and just trying to keep our head above water.

Ask yourself before you buy:

  • What value does this item add to the quality of my life?
  • Will I still get this same level of value in 6 months? 12 months? 2 years?
  • If it’s worth it, split the cost over a few weeks, set up a new account and put the funds in there each pay.

Summary

Being good with money is different in 2019 than 1970. With easy access to credit and the high cost of living plus many other factors, it’s hard to save. But you’ve got to start somewhere. Living within your means and focusing towards the future is vital. If you take my tips on board you’re probably at least 50% better off than your peers.

If you want to chat further feel free to contact me at aidan.tewake@foxplan.nz.

The views and opinions expressed in this newsletter are not intended to be a personalised service for an individual retail client. The views and opinions are general in nature, may not be relevant to an individual's circumstances, and constitute class service only. Before making any investment, insurance or other financial decisions, you should consult a professional financial adviser of FoxPlan Limited.
A disclosure statement is available on request, and free of charge.

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